Earnings per share (EPS)is calculated as:
A)net income divided by the number of shares of common stock issued at the end of the year.
B)net income divided by the number of shares of common stock outstanding at the end of the year.
C)net income divided by the average number of shares of common stock outstanding throughout the year.
D)net income divided by the average number of shares of common stock issued throughout the year.

Question

Quizplus · Accepted Answer

EPS is calculated by dividing the net income of a company by the average number of shares of common stock outstanding throughout the year. This is because the number of shares outstanding can vary throughout the year due to share issuances and buybacks. Using the average number of shares outstanding throughout the year gives a more accurate representation of the company's earnings per share.

Earnings Per Share (EPS)is Calculated As